Goldman Sachs Trashes Coach's (COH) Spring 2015 and Fall Product; Analyst Reiterates Sell Rating

Goldman Sachs reiterated a Sell rating on Coach (NYSE: COH) with a price target of $32. Analyst Lindsay Drucker Mann said the company's crisis is manifesting itself in its new assortment, and she compared its turnaround to J.C. Penney (NYSE: JCP) and AEROPOSTALE, Inc. (NYSE: ARO). She went on to say both the spring 2015 fashion product and the fall commercial product appear problematic.

"Our Sell rating on COH over the last two years has been anchored on concerns of market share erosion on the encroachment of new competition. As COH's brand turnaround initiatives came into light, our bearish view evolved to include a new layer: concern that COH's high-fashion focused brand turnaround is doing harm by taking the assortment too far out in its aesthetic and price points, and neglecting the core attributes of classic and quality-within-reach that historically defined the brand. We see parallels to unsuccessful turnaround attempts by retailers like JCP and ARO, which "fired" their old customers before acquiring a critical mass of new ones," said Drucker Mann.

"The spring collection is too far out – Pastel fur coats, flat form slide shoes, and cartoon animal prints are focal points of the collection. The quirky vibe runs the risk of turning off COH’s core consumer . .. Consumer response is discouraging – 57% of the relevant comments we observed on COH’s Instagram were decisively negative . . . Fall 'commercial' bags lack innovation – Core silhouettes at the ~$300 price point are basic and unlikely to inspire purchase, in our view," added the analyst.

For an analyst ratings summary and ratings history on Coach click here. For more ratings news on Coach click here.

Shares of Coach closed at $37.35 yesterday.

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